Oireachtas Joint and Select Committees
Thursday, 14 February 2013
Joint Oireachtas Committee on Agriculture, Food and the Marine
Irish National Stud: Discussion with Chairman Designate
I remind members and witnesses to turn off their mobile telephones. The purpose of this morning's meeting is an engagement with designated chairmen. I welcome Mr. Matt Dempsey, chairman designate of the Irish National Stud and Mr. Joe Keeling, chairman designate of Horse Racing Ireland. I thank them both for their attendance.
I wish to draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person, persons or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
I invite Mr. Dempsey to make his presentation. The committee is interested in hearing the approach he proposes to take as chairperson and his vision and priorities for the challenges facing the company.
Mr. Matt Dempsey:
Thank you, Chairman, for the invitation to address the committee following my nomination by the Minister for Agriculture, Food and the Marine to the chair of the National Stud.
On the global scene Ireland is the third largest producer of thoroughbreds in the world, after the US and Australia. Argentina is vying with us to some extent. The thoroughbred horse sector is a remarkable story. Over 40% of the EU output of thoroughbreds is produced in Ireland, and we have by any standards a remarkable record in producing many of the world's greatest winners on a consistent basis. We also have a remarkable record in attracting stallions to stand here. It is a sector that demonstrably has a global capacity to compete. Sectors with a global capacity to compete on a level playing field are few enough in the Irish economy. Why else would it be the case that we have one of the greatest horses, Sea the Stars, owned by a Hong Kong business family, who spent his formative years at the Irish National Stud, won many of the world's most prestigious races from an Irish training yard, and then retired to a stud in Ireland owned by the Aga Khan? It is a truly international sector with a high profile and image. Nobody disputes the broad importance and the international credibility of the sector.
The key discussion point of today's meeting is why there is a need for an Irish National Stud, our view of it and what its place is in a modern Ireland. The committee will then have to decide whether I am a fit person to hold such a prestigious position.
The mission statement is simply to promote the interests of the Irish bloodstock industry by providing the services of high quality stallions to as wide a range of breeders as possible but the act of setting up the stud or at least assuming ownership of it, as the State did in 1946, is much more comprehensive than might be supposed. It is worth noting that until 1943, the farm at Tully was in fact part of the British National Stud. Ireland in 1946 was not a rich country but even then the Government recognised that a thriving national thoroughbred stud was important and it made available £60,000 sterling for the purchase of its first stallion, Royal Charger, equivalent to almost €2 million in today's terms. In 1952 it made available £250,000, an enormous sum at the time, for the purchase of Tulyar.
The committee will be only too well aware of the inevitable choices that must be made in fulfilling a necessary mandate to be profitable and commercial while reconciling that with the desirability and duty to take a wider national imperative into account. The wider remit than pure commercialism is encapsulated in sections of the Act which give among its objectives to put into operation special schemes for the improvement of horse breeding and to locate high class stallions and if necessary to make them available at reduced prices and also to provide an advisory service for breeders in regard to the mating of their thoroughbred mares. Its permitted role under the Act is wide, including to raise or borrow money or to receive subsidies from the State and even to provide living accommodation for the company's directors, which is worthwhile as a precedent.
The stud also has a thriving tourism business from the County Kildare perspective as distinct from its international impact in trading the service of stallions. The Japanese Gardens, St. Fiachra's Garden and the Irish Horse Museum are nationally important tourism attractions, which are important for the generation of employment in Kildare. They also tend to be a destination in Kildare rather than being visited on the way to somewhere else. They have in excess of 115,000 visitors a year and have reached as many as 140,000. The intention is that we will continue to build on this.
The National Stud is important in terms of the quantity and quality of the foals it produces. In 2011 the National Stud's sires produced 800 flat foals, 20% of that year's flat foal crop. That might surprise members. This is an extraordinary figure and forces one to revise the view that the country has more than sufficient stallions and stallion farms to meet the needs. Standing a stallion is an expensive, risky business and the numbers of stallion farms has dropped significantly in recent years. While the Coolmore and Maktoum operations grab much of the headlines I firmly believe that it is very much in the national interest that access to stallions of a range of qualities is available to breeders outside a very restricted grouping of specialist stallion studs. Even from the perception of the industry by the ordinary taxpaying public a range of participants is highly desirable.
Ireland has a number of real advantages in producing world-leading horses that are encapsulated in the record of the National Stud itself. It is no accident that recent world beaters spent their formative growing years growing here - Frankel among them. The key ingredients that have driven many to look seriously at the horse industry from all over the world are land, including the limestone base of soil - I can go into it in detail - climate, and labour in the broadest sense, including innate skill with horses.
With this set of national advantages, the National Stud was the first in the world to recognise the need for a formal educational structure in stud management. Since 1970 it has fulfilled a role that has become a template others have followed. This course has produced many of the current leaders of the industry worldwide and is something I would be keen to see built on. In this year of The Gathering, approximately 1,000 graduates from the National Stud course have been invited to come to lunch at the stud during the Derby weekend, which should become a focal point for them and us.
With the growing perception of the quality of the Irish thoroughbred horse, my view is that the stud could usefully carefully extend its brief to one specifically allowed for in the Act, that is, to provide specific thoroughbred breeding advice. Obviously, that would be of most use to farmer families on suitable land who might see diversification into selective thoroughbred breeding as a worthwhile additional enterprise. As it is, the stud provides opportunities in partnership with other farms for National Stud stallions to stand around the country - there are two in Wexford and one in Laois.
In today's Ireland the National Stud must be a commercial success. It must stand on its own feet commercially and be in a position to have a range of stallions, with at least one representative at the very top of the quality pyramid. We are fortunate, following Lady Chryss O'Reilly's term, that we have a capable and skilled chief executive in place, a strong balance sheet, an excellent complement of stallions and a growing complement of mares. I intend to chair a board that will build on this favourable inheritance. The next key requirement is to source a top class stallion that will in time replace the outstandingly successful Invincible Spirit.
I thank the Chairman for the opportunity to set before the committee this unique institution that is the Irish National Stud, its associated tourist enterprises in the form of the Japanese Gardens and its sizeable commercial farms, and its importance as an employer of skilled staff in both the equine and tourism sectors.
I thank Mr. Dempsey. To clarify, it is not our decision. The programme for Government provides that all chairmen designate of State boards are invited in for a discussion with the relevant committee. The decision rests with the Minister. Previous chairs to State boards were simply nominated; there was no forum in which they could engage in a public discussion. That is the purpose of this procedure. The discussion that will follow from here may or may not change the Minister's mind, but it will not be our decision. I call Senator Mooney.
Fáilte to Mr. Matt Dempsey and Mr. Joe Keeling. Even though they are both chairmen designate I congratulate them on their appointment. Mr. Dempsey's CV is impressive and a cursory glance at his background, commitment and active involvement in the agricultural area and agricultural science tell us that this country is blessed to have somebody of his calibre who is prepared to take on a public position such as this one. I wish him well in that regard.
I am not an expert. I am an ordinary member of the public who looks on at the activities of the National Stud. It is an awesome phenomenon that Ireland has developed over decades. The background Mr. Dempsey has provided in how it all started was very informative for me and, I am sure, other members.
I have one or two questions but I will be brief because members with more expertise than me in this area may want to raise matters with the witnesses. First, I get the impression that it is important we have quality standing stallions. Mr. Dempsey referred to one or two from the beginning including Tulyar. I am old enough to have Tulyar in the back of my mind. When Tulyar was purchased it must have been a major national story at the time. Mr. Dempsey said the amount of money involved in 1946 was £60,000, which equates to €2 million. I wonder what £125,000 in 1952 equates to now. It cannot be anything less than €84 million or €85 million. That is an extraordinary amount of money for what was a time of deep economic difficulty.
In terms of Mr. Dempsey's commitment and going forward, how does one develop a unique stallion because while he mentioned the figures for the foals and the standing stallions, one or two appear to stand out. What is the importance of that internationally in terms of the National Stud, and how will Mr. Dempsey go about developing that? Does it happen randomly or is it done by science?
Second, I am very interested in the tourist dimension, which Mr. Dempsey outlined. This is the year of The Gathering. The Queen visited the National Stud. Has Mr. Dempsey found from talking to people or from his involvement in other areas, and living in Kildare, that there has been a spin-off from that? What are the demographics in terms of the people who visit the National Stud and the Japanese Gardens? Are they "horsey" people or people who are part of a tourism package? How does Mr. Dempsey hope to develop and increase that figure? He mentioned that he hopes to do that. I wish him continued success in what is an important role for this country.
I welcome Mr. Dempsey to the committee. I wish him well in taking on what will be a challenging but important role for the racing and breeding industry, not to mention the tourism aspect.
As a TD for Kildare South I am very much aware of the importance of the National Stud and Japanese Gardens from a tourism point of view. The figure of 115,000 visitors does not surprise me because it is the first port of call for any tourist visiting the county and leads to spin-off tourism in that people come to the National Stud and then visit other areas. The National Stud and the Japanese Gardens were the initial draw, however, and they are extremely important.
In that regard, The Gathering event that will happen on Derby weekend, which Mr. Dempsey touched on, is very exciting. He mentioned it in terms of inviting former students of the stud management course to attend. The stud management course has been run since the 1970s and is viewed as being prestigious throughout the world; I believe Mr. Dempsey said it draws on students from 32 countries. What is his view on how that may be developed in the coming years?
Ireland is a very different country now, and our breeding industry is very different from that which pertained in the 1940s when the National Stud was purchased. How has that change impacted on the requirements of the industry now? Does the role of the national stud need to develop somewhat to take cognisance of that? I have no doubt about the importance of its place in the industry, but adapting to changing times and the changing needs of the smaller breeders was always its target.
The National Stud as a landmass is a very large piece of land. Obviously, the focus has always been on the thoroughbred sector. Is there a dimension that Mr. Dempsey sees in terms of diversifying into sports horses? Such potential would be welcome. Is there any angle in that respect that Mr. Dempsey believes could be advanced?
Mr. Dempsey said the stud must be financially viable. Much concern was raised when one of Colm McCarthy's reports listed it as a potential site to be sold. Many of us made sufficient noise to the effect that that would not be a good idea but it is important that it trades profitably because it has the potential to do so. Mr. Dempsey might indicate the current trading position and the way that is looking for 2013.
I take this opportunity to acknowledge the role of Mr. Dempsey's predecessor, Lady O'Reilly, who did a fantastic job in giving a major personal commitment to the National Stud and expressed that along the way. The chief executive officer, John Osborne, also saw it develop over recent years, including the ongoing development of the facilities at the stud. The Queen's visit definitely helped to enhance the tourism aspect and raised the profile of the stud for Irish visitors as much as for foreign tourists.
I wish Mr. Dempsey well. His CV makes him eminently qualified for this position. I look forward to working closely with him in his new role and wish him every success.
I welcome Mr. Dempsey and wish him all the best as chairman designate of the National Stud. Deputy Heydon asked about diversification into sports horses. I would be interested to know if it is one of Mr. Dempsey's visions that the National Stud might get involved in that.
Mr. Dempsey's role is very wide, including to raise or borrow money.
Mr. Dempsey said there is a very healthy balance sheet. Is there a limit to what the Irish National Stud can borrow, even for the purchase of a stallion?
The stud management course is very interesting. Is it run under the Department of Agriculture, Food and the Marine or the Department of Education and Skills? How many places are available each year? Is the course subsidised or must one pay fees?
We have all heard of stud farms such as Coolmore, the prices their horses can make and the stud fees they command. I do not know whether the Irish National Stud goes into partnership with anybody. Is there a partnership? Would it go into partnership, perhaps to share the use of a stallion?
Each new board and chairman brings a different dynamic to the running of the organisation. Will Mr. Dempsey outline some of his priorities? What is his vision for the stud in five or ten years after his chairmanship? I hope he will be there for longer than that. I wish him all the best in his position and thank him for attending.
I welcome the two guests. I am not a member of the committee but when I saw that both delegates were presenting their case and cause this morning, I said I had to come along. As the Chairman stated, this is not an exam. We are not giving the delegates marks. Mr. Dempsey is probably safe enough regarding the job.
Knowing Mr. Dempsey's background and his innovations in agriculture in journalism, I wonder what catches his eye this morning. I was very interested when he mentioned the possibility of extending his brief to provide thoroughbred breeding advice, which would be of use to farm families on suitable land. Under the Act, such a dimension to the stud's work is allowable but it may not have been concentrated on much in the past. Will Mr. Dempsey expand on it? The core role of the Irish National Stud is being fulfilled very successfully, as outlined. Anybody with an interest in the broader horse-racing industry must always have the aim of trying to involve an increasing number of people in selling the racing and breeding industries' attractions to as broad a public as possible. We need to get new people on board. I would like to hear Mr. Dempsey elaborate on his role in this regard. His role will be very interesting and key. I look forward to hearing his thoughts.
Some 115,000 visitors go to the Japanese Gardens annually. We must admit that figure is impressive. However, one should consider that thousands of people visit Kildare Village every weekend to spend good money there. Over the course of 12 months, therefore, millions of people pass by the stud. While 115,000 is very impressive, it is a figure that Mr. Dempsey could almost hope to double during his term in office. Some 12 months or two years ago, there were interesting television advertisements for the Irish National Stud. I have not seen them; perhaps I am watching the wrong channels. Will Mr. Dempsey talk about this? We should not be satisfied with the figure of 115,000 as we could increase it very significantly given the road network and the geographical position of the stud.
I wish Mr. Dempsey well and I look forward to what he will bring to the table. His appointment is very exciting for the Irish National Stud.
Mr. Dempsey will be more aware than most of the issue of climate change. The carbon footprint poses a particular challenge for Irish farming. There is potential for considerable benefits because of the advantages Ireland enjoys with regard to carbon efficiency. I suspect, but do not know, that the same is true for the horse training and breeding industry. Is there something that the Irish National Stud could do to make the industry slightly more carbon efficient and highlight the fact that Ireland is a particularly carbon-efficient place for breeding and training, as it is for the broader agriculture industry?
I welcome Mr. Dempsey and thank him for his presentation. I have known him for many years since my time with the IFA and the Irish Farmers' Journal. Some years ago, we were delighted to have Mr. Dempsey open the Manorhamilton show.
We would not have too many thoroughbreds in a county such as Leitrim. However, we do breed and have bred quite a number of Irish Draught horses. A neighbour of mine bred the all-Ireland draught horse champion last year.
My colleague touched on the issue of limestone land. Will Mr. Dempsey explain the position on this? In the west, there is a significant amount of limestone land. It is probably good for the horses. How many mares and stallions are in the Irish National Stud? I wish Mr. Dempsey well.
Mr. Matt Dempsey:
I thank the Senators and Deputies for their good wishes, which are very much appreciated. While I was aware of the legal position, I would have been very disappointed if the committee had unanimously recommended to the Minister that he reconsider my appointment. That was all I meant by my remarks.
With regard to Senator Mooney's point, there are two aspects to the development of a stallion. The book fee of our current stallion, Invincible Spirit, is €60,000. Presuming that he serves 120 mares, that gives an earning capacity of over €7 million per year. From the pure arithmetic, one realises the considerable impact that one successful stallion can have on an operation of a very significant size. This holds true right across the stallion business in the country.
The amount of money that accrues from a successful stallion can be very significant. On the other hand, the losses from a misplaced investment can also be very large. It is quite a risky business. Happily, the record of the Irish National Stud in sourcing good stallions of various categories and grades has been very successful. In that context Invincible Spirit has been a real find.
How does a stud develop? One is dependent on the skill of the manager and his team, coupled with the advice of some of the specialists on the board. Part of the manager's job is to be aware of what is happening worldwide, how various two year olds and three year olds are performing, what animals are likely to be for sale, and how well disposed existing owners are to seeing a stallion stand at the Irish National Stud, or have the stud as a customer. It is quite a restricted world at that end of the stallion spectrum. One is competing with world players in the same market. A combination of expertise and goodwill is required and one must be in the right place at the right time and meet the right people. The chief executive manager of the Irish National Stud, Mr. John Osborne, has a pivotal role in the success of the operation. Part of the board's role involves some of the more specialist members providing Mr. Osborne with a sounding board for his views and opinions and assisting with whatever introductions are required and the knowledge available worldwide. It is also a question of what mares one gets, how successful the stallion is in the first few years, and how it develops from there.
Consider the spin-off effect in the Japanese Gardens and the 120,000 visitors, which figure was raised by a number of members. The gardens are obviously a very significant tourist attraction. The bulk of the visitors are domestic. There is widespread interest in gardening internationally, however, and most Japanese tourists who come to Ireland make it their business to see the Japanese Gardens. There is a very extensive collection of international plants in the gardens, so keen botanists come regularly, as do families for a day out.
The intention is to build on that. I take the Senator's point on advertising in recent years and whether it should be augmented. Obviously, this will be examined and we will be discussing it. The Queen's visit had a major spin-off with much interest expressed in the stud. The horse facilities at the stud are available to public viewing so empathy can be created between the ordinary taxpaying public and one of the State's institutions.
It is hoped a profit of €500,000 will be made in 2013. Last year, the stud under Lady O'Reilly and John Osborne did a bit better than break even. This year is looking more promising and the minimum expectation is that a profit of €500,000 will be earned. Regarding the question on syndication and sharing of stallions, this is an active part of the stallion business. It is highly desirable that a number of rights in good stallions would be held by individual breeders from across the spectrum that would be purchased by the stud. This is part of the normal thoroughbred life and the National Stud is an integral part of that on a strictly commercial basis with breeders who wish to participate. The sums involved in purchasing a high-class stallion can be very significant. The National Stud has no great desire to be looking for funding from the Exchequer. A borrowing limit of €30 million has been set by the Government but it is hardly used at this stage as the debt level is very low. There is a legal capacity to buy but we want that to be matched by a commercial reality.
I must admit the question on sports horses is an interesting one. Professor Patrick Wall has been designated the chairman of Horse Sport Ireland. These are really two different businesses. Certainly before committing that that would be my policy, I would prefer to get a feeling from the board and from John Osborne. I would be surprised if I could detect an overwhelming enthusiasm to get involved in the sports horse sector when there is so much ground to be covered on the thoroughbred side.
The best land for horse breeding is a combination of the brown earths and the grey-brown podzolics. While I loved my time opening Manorhamilton show, the amount of those particular soil series in Leitrim is pretty limited. The depth of soil across most of the limestone plains of the west, except for odd pockets, is not in my view conducive to training the highest grade three year olds with the potential to be classic winners. A neighbour of the stud near Kilcullen recently invited us to lunch. Within four miles of that estate, the classic winners Sea The Stars, Frankel and Camelot had spent some time in their formative years on this land. There is a clear association between definite soil series and land type. This is what has attracted international investors to parts of Cork, Kildare, Kilkenny and isolated pockets elsewhere. I say that without denigrating any other part of the country.
Mr. Matt Dempsey:
There is normally a set fee but there would be some degree of negotiation at the same time. If a particular promising mare is booked in and there are two stallions vying for her attention, then if the mare is quite exceptional it would make a lot of sense to give a reduced fee to produce the best possible stock.
Up 20 student places a year are offered and are keenly fought for at the stud. There are no fees but the students work on the stud performing many duties. It is heavily oversubscribed every year. The National Stud course which was started over 40 years ago has been used as the model for the Darley Flying Start programme in which the Maktoum family is deeply involved.
On the stallion purchase policy, racing is cyclical in that one could have three absolute champions for several years and then there would be more modest stallions. The National Stud has a flagship stallion and if it could have two or three, all the better. Using a phrase from a former colleague of ours, there is a gap in the market so is there a market in the gap? If there happened in a particular year to be four seriously interesting stallions for purchase, does the National Stud have the capacity to buy them or is it happier to have the flagship stallion and wait six years before making a serious commercial purchase?
Mr. Matt Dempsey:
My view is that one takes the opportunities as they come. There is no doubt that at times there will be a need to ensure a high-quality standard stallion is purchased to be available to breeders and as a revenue earner for the National Stud. The situation is slightly more comfortable when one has one or two of those high-quality stallions in place. It is also important at the same time to have a range for the broader spread of mares that may not be suitable to go with those high-quality stallions. At this stage the stud owns six stallions and 23 brood mares. The number of mares has increased over the past three years. Talking with John Osborne, there is a certain degree of optimism that there would be good sales revenue coming from the yearlings they produce.
Mr. Matt Dempsey:
No, the flat racers do not. That would be an interesting policy shift if it did occur. Interestingly, Coolmore at the top end keeps its stallions based in Ireland. I recall seeing Galileo in Australia as part of his rotational duties. Once he became a world figure, he was based and kept at home.
Much fuss was made about tax designation for stallion nominations.
I am not asking Mr. Dempsey for a direct opinion. Regardless of whether there are tax incentives, it seems players such as Coolmore and the Maktoums will locate here for all the reasons, such as climate, he stated. For the smaller stallion owners, however, it would seem that there are tax incentives for artists and others, but I will be totally politically incorrect here and state that there should have been one if one wanted to nurture the sector - this goes across all owners of stallions, not only thoroughbreds. I say this as much for the sport horse sector, where we have lost significant ground in the area of show-jumping compared to where we were, and yet we still do quite well in eventing. Mr. Dempsey may have an opinion on it.
Mr. Matt Dempsey:
It is a really interesting area. There are various national schemes being put in place. The complaint was made to Brussels that it was anti-competitive and therefore there is the corporate tax structure. The corporate tax structure at 12.5% suits. Major studs can live with that fairly easily, and it is a bit of an extra administrative chore which somebody can do. However, for small breeders a corporate structure is a different kettle of fish.
I would agree entirely with the Chairman. The sale from yearlings was always fully taxable. It was simply the stallion income that was exempt. When one looks at the existing French schemes and the new British schemes that are being put in place, let alone those of the Japanese and whatever the Chinese will do to try to get into the market, it is a pity that we did not try to take a more structured view as to how the industry might be best encouraged into an international framework.
I merely felt it was worth putting that on the record because it is a debate we should have at some stage.
I thank Mr. Dempsey. I was a member of the previous Joint Committee on Agriculture, Fisheries and Food which had the CEO and members of the board before it. At that time, Mr. Osborne had recently taken up his role and the position was anything but healthy in the National Stud. I recall being down there a couple of years ago, possibly, to visit the Japanese Gardens because I had some tourists with me, and I noted the fascination with the horses, especially among younger children who are not from a farming background.
It is vitally important that the stud is maintained in national ownership. In some ways, it is similar to Teagasc in research development. As Mr. Dempsey stated, it is a product with which we can compete globally and we do not have too many of them. It is important that we have a nurturing ground for the sector. Horses are something at which the Irish, like the North American Indians, are very good. We seem to have a natural affinity with them.
I wish Mr. Dempsey well. He is welcome to stay with us if he wishes because we will go through the formalities to the end of the meeting that this procedure has taken place.
Mr. Matt Dempsey:
I wish to place on record the remarkable job that my predecessor has done during quite a difficult time for the National Stud. The installation of Mr. Osborne has all been handled smoothly and Lady Chryss O'Reilly has been extremely helpful to me as I prepare. I thank the Chairman and his colleagues for the opportunity to address the committee.